One of the most important tools that a central bank has is its credibility. This is why recent reports that Federal Reserve officials, many of who have been actively trading accounts and buying securities that could benefit from their decisions are potentially damaging.

These reports have overshadowed this week's Fed meeting, where no change in policy is expected but potentially announce when its tapering will begin. Members will also release their dot plots which also have the potential to move markets.

Currently, most analysts and Fed-watchers acknowledge that the Fed's scandals are embarrassing, but they don't expect any impact on policy. However, it could change dynamics when it comes to appointments on the central bank's board.

Some of the Fed governors such as Boston Fed Chair Rosengren and Dallas Fed Chair Kaplan were very active in trading securities that would be impacted by Fed policy. Technically, there is no violation of laws, but it does highlight the lack of structural reform by the institution following the financial crisis despite insisting on such changes from the banks it regulates.

A Fed spokesman said Chair Powell is asking staff to examine its ethics rules around financial holdings and activities by senior Fed officials. It's unknown whether this will impact Powell's odds of being reappointed. Most expect him to be reappointed given the position's importance, divided government, and his support of dovish policy.

However, the party's left-wing is opposed to his reappointment, while the administration seems content to see how the Fed handles the taper and whether the economy can bounce back following the Delta variant throwing a wrench in the recovery.

Conclusion

While the Fed has its share of critics, it's also one of the most trusted institutions on the planet given that its two major products - the U.S. dollar and U.S. treasuries - are two of the most highly sought assets in the world. So many of the U.S.'s advantages stem from this, so anything that could shake the institution's credibility could have major ripple effects through the global economy.